Venture capital is a long game with murky feedback loops. IRRs, DPI, and TVPI can tell part of the story—but they rarely help you answer why some investments win and others don’t. That’s where cohort analysis comes in.
Why Cohort Thinking Wins
At its core, cohort analysis is about grouping similar investments and tracking their performance over time. It turns intuition into insight. Instead of looking at your portfolio as a lump sum, you ask: how did our 2019 seed fintech cohort perform vs. 2020 B2B SaaS bets?
Defining Your Cohorts
There’s no one-size-fits-all. Pick based on what you’re trying to learn:
- Vintage year: Most common. Compare returns by year or fund.
- Stage: Seed vs Series A, etc.
- Thesis/theme: AI vs ClimateTech, Consumer vs DeepTech
What to Measure
Once you’ve defined a cohort, track performance over time using these metrics:
- Capital deployed
- Follow-on rate
- Step-ups and markups (TVPI trajectory)
- IRR (at time-controlled intervals)
- Exit multiples (gross MOIC)
- Time to exit
- Attrition/shutdown rates
Execution Framework
- Define cohort scope
- Pull consistent data (CRM, memos, quarterly updates)
- Normalize round definitions and timelines
- Visualize results (TVPI curves, cohort waterfall charts)
Tools of the Trade
- Early-stage firms: Airtable, Google Sheets
- Later-stage/complex: Vestberry, Carta, Pitchbook, TotemVC
What You’ll Uncover
- Which stages drive your returns
- Whether your thesis is compounding or stalling
- Which cohorts have highest survival and markups
Pitfalls to Avoid
- Ignoring failed companies (survivorship bias)
- Drawing from small samples (3 deals ≠ a trend)
- Over-engineering (don’t use 5 filters at once)
- Using outdated data (quarterly updates minimum)
Make It a Discipline
The best firms bring cohort reviews into ICs and LP updates. Over time, it shapes strategy, pacing, and ownership targets. Done right, cohort analysis is more than reporting—it’s the way to build repeatable insight into your investment process.
Let the numbers tell their story—and make sure you’re listening.
